IN-DEPTH: Taj Hotels’ Puneet Mahindroo on RM strategy

Published: 06 Oct 2009

IN-DEPTH: Taj Hotels’ Puneet Mahindroo on RM strategy

One of the key challenges that most revenue managers and industry at large is going to face is related to determining the most accurate and realistic projection of the future.

One must learn to plan for optimistic, realistic and most pessimistic scenarios so that mid-course flexibility is built-in and correction can be done in a fast and proactive manner, according to Puneet Mahindroo, corporate director of revenue management & global distribution, Taj Hotels Resorts and Palaces.

Mahindroo, who is scheduled to speak at the EyeforTravel’s Travel Distribution Summit India 2009 in Mumbai this week, spoke to EyeforTravel’s Ritesh Gupta about the role of RM in today’s environment. Excerpts:

Firstly, how do you assess the economic scenario in India as far as the travel and tourism sector is concerned? How has this affected travel distribution business?

Puneet Mahindroo: It has been challenging past months for the industry at large. Not just in India but globally. However, once again the industry has demonstrated a strong sense of resilience. We have seen the industry take some creative sales and marketing approaches and this has also impacted the overall distribution. We have observed:

It is counter intuitive to other disciplines, but RM tends to work harder in down markets. Many people think that because there is no excess demand to yield there is much less work to do in RM. What do you make of this viewpoint?

Puneet Mahindroo: I think this is a misnomer. Though I wouldn’t want to generalise, unfortunately, several people still see revenue management as a tactical yield management function and thus, it is very easy to assume that it is all about demand management and maximisation of yields. But over the years, revenue management has evolved into a more holistic science and discipline that forms a formidable competitive advantage to companies in terms of market mix management, pricing, distribution, loyalty marketing and in more evolved enterprises – CRM. In my opinion, in the modern times the true definition of Revenue Management is based on a “constant exploration of revenue opportunities whist minimising the risks to business and that leads into maximising the overall profitability”.

If it is not acceptable to compromise on price integrity at any level of unqualified business, could you provide an insight into other ways to discount and to attract additional customers that do not compromise your core pricing?

Puneet Mahindroo: Yes, there certainly are several avenues and we all have been witness to the same in more recent times. Two elements have been the most successful and popular in dealing with the situation:

However, the point I would like to make here is that pricing integrity is not just about BAR parity which is a common mistake I come across at times. It is pricing to support the most optimal customer mix that best suits the brand and at the same time logically differentiates the different price points that are available to the potential and targeted customer base.

What do you think are going to the key issues which RM managers need to focus upon going forward – would it be customer rate resistance, contract renegotiations, competition or price wars?

Puneet Mahindroo: I think the key challenge that most revenue managers and industry at large is going to face is in determining most accurate and realistic projection or forecast of the future. Since, this is what is going to determine several aspects of pricing, distribution and the overall strategy. Price wars, renegotiations and competitive pressures are part and parcel of the day-to-day job – be it high or low demand. What really makes the leader is the one who lives in the future and can best anticipate strategies to out-perform based on solid sense of the various customer segment behaviour and demand – “Right There In the Future”.

RM is the key to manage peak and off peak pricing. Managing segments which will help tide over off peak periods has to be looked at from a perspective of overall hotel strategy. What’s your viewpoint regarding this and what do you recommend when it comes to preparing for this strategy?

Puneet Mahindroo:I believe that RM is very much an integral part of the overall hotel strategy and needs to be well integrated with the sales and marketing approach of the hotel or company. In fact, I’m from the school of thought that believes that if revenue is what all divisions drive then how can there be a separate RM strategy to begin with.

The key is going to be a realistic assessment of the future and the company that best positions itself in terms of its segment-by-segment approach will gain the most. The best way to prepare for the same is to have an open-minded, inclusive and yet balanced view from all stake-holders – Internal Hotel Divisions, Customers, Partners and Industry Trade or Associations. One must also learn to plan for optimistic, realistic and most pessimistic scenarios so that mid-course flexibility is built-in and correction can be done in a fast and proactive manner and one must minimise going back to the drawing board all the time – you might just miss the boat. Our industry is influenced by several macro-economic, social and political factors but yet our estimates of demand remain fairly accurate amongst several such industries. So planning for the future should not be such a nightmare.

Revenue Management practices place a lot of emphasis on capacity constraints, time cycles, and price variables. If one were to go by this view alone, any reference to the “right consumer” is limited only to their ability to pay the optimal price. In some ways, this approach may be deemed to be short term, transactional biased and product orientated. Do you foresee any major change in this in the time to come?

Puneet Mahindroo: The change is already here and has been here since Harrah’s first came up with their CRM Based Revenue Management model. I think the word “Right Customer” is the most critical to address. I wouldn’t want to generalise this as a concept since each company may prioritise in different manners depending on the brand and its nature of operation. However, the fact remains that traditionally hotels have segmented their customers as Corporate High, Medium and Low and similarly, other such segments by price bands. Gone are those days. My point of view on this has always been supportive of what Harrah’s institutionalised several years back. The Optimal Rate is an extremely short term approach and there needs to be a more robust way of identifying and associating the true relevance of the long-term relationship of the customers.

But does that mean that we completely move away from the short-term optimisation of the rate? No, this is not what I mean. We must continue to yield but at the same time I’m suggesting that there has to be a clear and definitive balance that acknowledges long-term and sustainable customer relationships so that short-term tactical rate optimisation doesn’t end up damaging this loyal and long-term pool of our customer base.